3rd Generation Mobile Network Will Cost SR9b

JEDDAH, 24 September 2003 — Saudi Arabia will need SR9 billion to build its third generation mobile telephone network, according to an economic study published by Al-Hayat newspaper yesterday. It said the project would affect the Saudi Telecom Company’s liquidity during 2006-8.

The Gulf Investment Corporation, which conducted the study, also expects a new mobile phone company to be formed by 2005.

The government decided to open up the telecom sector for competition by the last quarter of 2004. Partial opening up of mobile phone services will start in 2004 and of land phone services in 2008, a Cabinet statement said.

The Shoura Council had earlier passed a draft bill to end the state’s telecom monopoly and allow foreign investors in. The bill allows for the establishment of new shareholding companies while not ruling out foreign investment, a council member said.

The bill recommended the setting up of joint stock companies to provide services but did not stipulate a minimum capital. It aims to pave the way for the development of quality telecommunication services at lower cost with the free play of market forces.

Competition among Saudi telecom companies will intensify by 2006, when a third company will be licensed to provide mobile telephone.

In the same year the license for the third generation of mobiles will also be issued, the study said. It expects the number of mobile phone subscribers to have doubled by then.

“These developments will create new challenges for the company and test its ability to face competitors,” the study said.

It expects STC to keep its monopoly on the land phone market until the end of 2007, when it may allow another company to provide the service.

Competition between these companies will naturally reduce STC’s revenues from single subscribers from $60 to $40 per head by 2008. Liberalization of the Kingdom’s communications sector has expanded its mobile phone market as the number of cell phone subscribers has increased by 267 percent since the end of 2000 and the company has earned huge profits.